It is good to see that an increasing number of businesses and organisations are taking full advantage of the UK Government’s research and development (R&D) tax credit scheme. In recent years, many companies have overlooked the benefits of R&D tax relief, simply because they were unaware that their day-to-day operations and tasks counted as R&D. This includes, among many other companies across many other sectors, property developers.
We are increasingly seeing innovative firms in the construction industry enhance their qualifying expenditure. These are companies that seek advances in science or technology to improve processes and solve problems enhance their qualifying expenditure. Small firms can improve their claim for 130% of their qualifying expenditure. For small firms that make a profit, this means that for every £1 spent on qualifying R&D activities, the tax relief reduces the net cost of their spending by 44p per £1.
Looking deeper into the construction sector, we find that many property developers and housebuilders still overlook R&D tax relief when attempting to improve their processes, systems and overall output. Perhaps they may wrongly believe that R&D tax relief is eligible only to those in the technology sector. However, the reality is that any business investing time and money in attempting to advance their industry is eligible for R&D tax credits.
What property development activities and projects are eligible for R&D tax relief?
- Property developers work on innovations e.g. renewable and affordable energy materials
- Development project technical issue problem-solving, e.g. restricted site access or minimising local disruption
- Property developers researching eco-housing designs and materials
- Property developers researching affordable housing designs
- The conversion of properties from commercial to residential use
- Property developers working with listed buildings
- Property developers at the planning stage of ground-breaking or complex building designs
The two types of R&D tax relief that Property developers can claim
SME R&D Relief
Property developers with fewer than 500 employees and a turnover of less than €100m can claim for SME Relief. This also applies to developers with a balance sheet of below €86m. Property development firms can cut 130% of all R&D costs incurred from their annual profits, on top of the existing 100% deduction. This relief is also available to loss-making developers, who can claim back up to 14.5% of all surrenderable losses.
Research and Development Expenditure Credit (RDEC)
Large-scale property developers with more than 500 employed staff members can claim for RDEC. This tax relief is also eligible to subcontracted businesses asked to undertake R&D tasks on behalf of a large-scale developer. Large-scale property developers can receive 11% tax relief on all qualifying costs as a result of RDEC.